Blockchain and the sharing economy 2.0

We are at the beginning of the blockchain technology cycle.
Bitcoin was the first and most notable application of the blockchain,
but it’s only the beginning. We now have a technology that can provide
trust in a network without a central authority.

Blockchain technology has the potential to reshape all economic activity.
It truly is that important. Unfortunately, awareness of the blockchain is
intertwined with Bitcoin, the
cryptocurrency, which limits people's thinking and obscures their vision
of greater possibilities. People find it difficult to see beyond the use
of blockchain as a platform for capital markets. However, its use within
financial services is just one niche use case.
Other valuable use cases
exist for using blockchain in everything, including the supply chain, such
as proving provenance in the diamond trade (for example, EverLedger), or enabling a chain
of custody for valuables (such as Assetcha.in), or, for providing better tenancy agreements in the
property market (such as Midasium). The
opportunities are only limited only by the imagination.

The landscape is further confused by the lack of standardized terminology
and competing projects. Some people talk about blockchain to refer
specifically to the Bitcoin blockchain. Others use the term blockchain to
mean a distributed ledger. Some companies are offering private blockchain
solutions, such as Ripple for financial settlements and Guardtime for data
integrity. R3CEV, for instance, is a banking consortium of 43 banks that
plans to build a private banking blockchain.

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The basis for all of this is that the blockchain can provide trust in a
network without a central authority. Standardization will come in time.
The Hyperledger project, led by
Linux, and including IBM and JP Morgan, is attempting to build a
cross-industry open standard.

Decentralizing trust

Centralization has been a core organizing principle for the economy and
society since the agricultural revolution. As the human population grew,
people had to make decisions that benefited the general population, not
just the individual, family, or clan. This centralization dynamic also
plays out in the economic realm. Larger organizations with more customers
tend toward vertical integration and centralized functions to increase
efficiencies and reduce costs. Economic centralization is the most
effective organizing principle when communication and transaction costs
are high. But this centralization is changing and will have profound
implications for human organization. The Internet brought communication
costs down. Blockchain will do the same for transaction costs.

Blockchain has the potential to be the most important democratizing
force in history because no central authority is required. The
applications of blockchains and decentralized trust are more powerful than
is understood. Industries as wide-ranging as accounting, legal services,
real estate, and e-commerce have all built business models based on
providing trust between a buyer and seller. In older industries, this
trust has been enshrined in law—providing a barrier to entry and
protection from new entrants. Blockchains, however, are a low-cost market
disruption to any business that acts as a middleman in a market.

The Internet allows content to be packaged up and sent to anyone else as
data without the need for a distributor. This reduces marginal
communication costs to almost zero. Blockchains are the economic
infrastructure that allows both physical and digital assets to be packaged
up and sent to anyone else without the need for a central authority. This
reduces marginal transaction costs to almost zero, which makes it just as
easy to sell a house as it is to make a micropayment for reading a blog.
The blockchain brings a scalable business model to anybody and everybody
on the Internet.

The sharing economy 2.0

As blockchain becomes more widely understood, many will focus on how it
disrupts existing industries. E-commerce, legal services, and real estate
will be targeted by lower-cost blockchain-based services. Some middlemen
provide far more value that just trust. Amazon.com, for example, provides
logistics, recommendations, and next-day delivery. Other middlemen offer
nothing more than a signature and legislation that insulates them from
competition. Eliminating the need for an intermediary could impact some of
the biggest technology companies. Rather than use Uber, Airbnb or eBay to
connect with other people, blockchain services allow individuals to
connect, share, and transact directly, ushering in the real sharing
economy. Blockchain is the platform that enables real peer-to-peer
transactions and a true "sharing economy."

Disruption is exciting and grabs lots of headlines and consulting fees.
But more importantly, blockchain will create new markets. These
markets will be ones in which individuals can trade non-traditional
assets like reputation, data, and attention. Blockchain makes any
activity, however small, easy to monetize. What about using blockchain
to share energy and earn energy tokens in a microgrid environment? What
about paying somebody an advice token for a 30-minute advisory call? Or
earning tokens for sharing genomic data. Each time the data is used, the
user receives a token in a licensing-type model.

Conclusion

The opportunities are vast—extending into all existing economic
activity and even social activity that can't yet be monetized. The vision
that blockchain will deliver is nothing less than the reshaping of society
and the economy. It is up to developers to start building applications and
experimenting. There are opportunities to provide cheaper auditing and
accounting services. Many legal contracts are standardized, therefore
blockchain and smart contracts can be used to offer cheaper legal
services. Thinking bigger, what about voting? The requirement for
security, anonymity, and fraud-resistance makes voting a prime use case
for a blockchain service. Blockchain will allow entire industries to
be rebuilt. It's time to jump in.